U.S. v. Furlett, 91-3772

Decision Date03 September 1992
Docket NumberNo. 91-3772,91-3772
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Norman K. FURLETT, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Edward G. Kohler (argued), Office of the U.S. Atty., Criminal Div., Barry R. Elden, Asst. U.S. Atty., Office of the U.S. Atty., Criminal Receiving, Appellate Div., Chicago, Ill., for U.S.

James S. Montana, Jr. and Richard G. Agin, Dickinson, Wright, Moon, Van Dusen & Freeman, Chicago, Ill., argued, for Norman K. Furlett.

Before BAUER, Chief Judge, MANION, Circuit Judge, and GIBSON, Senior Circuit Judge. 1

BAUER, Chief Judge.

On October 11, 1988, the Enforcement Division of the Commodity Futures Trading Commission ("CFTC") issued a complaint against GNP Commodities, Inc. ("GNP"), defendants-appellants Norman K. Furlett and Ira P. Greenspon and two others. The CFTC charged, among other things, that Furlett and Greenspon cheated and defrauded customers by illegally allocating profitable commodity futures trades to themselves while giving unprofitable trades to customers at various times from January 1984 to May 1986. All of the charges against the defendants involved violations of the Commodity Exchange Act and its regulations. See 7 U.S.C. §§ 6b(A), 6b(C), 6g(1).

After a bifurcated hearing in Chicago, Illinois and Washington, D.C., the CFTC's administrative law judge ("ALJ") entered an opinion on May 25, 1990, which determined that

[t]he facts set forth in this matter constitute a pernicious, widespread, and institutionalized scheme of cheating and defrauding customers, sustained without abatement or restraint over a period of years. The egregiousness of Greenspon's and Furlett's conduct is amplified by the recondite nature of their activity and the tacit acceptance of the fraud they perpetrated by [their supervisor] and GNP. As such, it is imperative that sanctions be levied against respondents to deter further illegal activity and to protect public customers for the type of insidious conduct described in this case.

See United States v. Furlett, 781 F.Supp. 536, 538 (N.D.Ill.1991) (quoting ALJ opinion). With this reasoning, the ALJ ordered the defendants to cease further Commodity Exchange Act violations, revoked their registrations with the CFTC, prohibited them from trading on any contract market, and required that each pay a civil fine of $75,000. The defendants appealed the ALJ's order to the CFTC. On August 11, 1992, the CFTC affirmed the ALJ's decision.

On April 3, 1991, a federal grand jury returned a twelve-count indictment against Furlett and Greenspon. Each was charged with conspiracy (18 U.S.C. § 371), nine counts of mail fraud (18 U.S.C. § 1341), obstruction of justice (18 U.S.C. § 1505), and subornation of perjury (18 U.S.C. § 1622). These charges involved the defendants' fraudulent commodity trade allocation scheme as well as their obstruction of the CFTC's investigation of their activities.

According to the indictment, Furlett and Greenspon became partners in a commodities brokerage business which was a part of GNP in December 1985. Id. at 537. In their role as brokers, they placed orders for the purchase or sale of a commodity without identifying the account for which the transaction was being made. The failure to identify an account number purportedly violated internal GNP rules as well as CFTC and commodities exchange regulations. Allegedly, Furlett and Greenspon would wait to see whether the relevant trade was profitable. If the trade turned out to be profitable, the defendants assigned it either to their own accounts or to accounts in which they held an undisclosed beneficial interest. If the trade resulted in a loss, the defendants assigned it to the accounts of other customers. The indictment also charges that the defendants used several means to conceal their fraudulent scheme and that they obstructed the CFTC's investigation of their trading practices.

In August 1991, Furlett and Greenspon filed a motion to dismiss the indictment, claiming that they already had been punished for these offenses by the ALJ's imposition of the $75,000 fine and trading ban. Given the ALJ's decision, the defendants argued, a criminal prosecution for the same offense violated the Double Jeopardy Clause of the Fifth Amendment. The government objected to the motion, arguing that the administrative sanction is no bar to a criminal prosecution. In support of its opposition to the motion, the government submitted an affidavit that catalogued the hours and other resources spent in investigating and litigating the case. Moreover, the government pointed out that, based on the ALJ's findings, the total customer losses caused by the defendants was approximately $223,000, while the combined net profits to the defendants' accounts exceeded $172,000.

On November 14, 1991, the district court denied the defendants' motion. Analyzing nature of the ALJ's decision with the reasoning of United States v. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989), and its progeny, the district court found that the administrative sanctions were remedial rather than punitive. The district court found the fines to be remedial essentially for two reasons: that the fines were a form of disgorgement, and that they were not overwhelmingly disproportionate to the CFTC's costs of investigating and litigating the defendants' activities. The district court wrote:

[O]ne might reasonably consider the fines as disgorgement, a sanction which the courts have consistently recognized as remedial rather than punitive. Thus, although the fines imposed by the ALJ did not compensate the victims of the defendants' wrongdoing, the fines may be characterized as remedial nonetheless.... [T]he Court [also] finds the [government's] affidavit sufficient to demonstrate that the fines imposed upon Furlett and Greenspon by the ALJ are not so overwhelmingly disproportionate to the CFTC's expenses in investigating and litigating their behavior that the fines must be deemed punitive....

Furlett, 781 F.Supp. at 544-46. The district court also found the trading ban to be remedial as applied to Furlett and Greenspon: "[T]he decision to exclude defendants from trading, even through other brokers, reasonably may be interpreted as an action necessary to ensure the integrity of contract markets and protect them from persons whose actions had, in the ALJ's view, demonstrated a lack of conscience." Id. at 547.

Both Furlett and Greenspon appealed the district court's denial of their motion to dismiss. On February 3, 1992, Greenspon withdrew his appeal and pleaded guilty to the conspiracy count and one count of mail fraud. Thus, only Furlett pursues this interlocutory appeal.

On appeal, Furlett renews his claim that the instant criminal prosecution violates the Double Jeopardy Clause. Furlett claims that the district court erred in concluding that Halper poses no bar to the pending indictment. He argues that the $75,000 fine and the trading bar do not serve solely remedial goals. These sanctions, Furlett maintains, constitute "punishment" for double jeopardy purposes. For these reasons he requests that we reverse the district court's decision and dismiss the indictment. See Defendant's Brief at 8.

At the outset, we observe that ordinarily the denial of a defendant's motion to dismiss is not an appealable final decision. Courts of appeal do have jurisdiction, however, to review the denial of a motion to dismiss based on the Double Jeopardy Clause. Abney v. United States, 431 U.S. 651, 662-63, 97 S.Ct. 2034, 2041-42, 52 L.Ed.2d 651 (1977). See also United States v. Patterson, 782 F.2d 68, 72 n. 7 (7th Cir.1986). Moreover, because Furlett challenges the district court's denial of his motion to dismiss which was grounded on the multiple punishments prohibition of the Double Jeopardy Clause, our review is de novo. See United States v. Reed, 937 F.2d 575, 577 n. 4 (11th Cir.1991) ("We review de novo the district court's double jeopardy ruling."); United States v. Benefield, 874 F.2d 1503, 1505 (11th Cir.1989) ("[A]s a question of law, a district court's double jeopardy ruling is subject to de novo review by the appellate court.").

Though we readily admit that the instant appeal is a close case, we ultimately are not persuaded by Furlett's contentions. The Double Jeopardy Clause of the Fifth Amendment provides: "[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb...." U.S. Const.Amend. V. As the district court properly noted, there are three scenarios that violate this provision: (1) a second prosecution of an individual for an offense of which he already has been acquitted; (2) a second prosecution of an individual for an offense of which he already has been convicted; and (3) the imposition of multiple punishments for the same offense. See Furlett, 781 F.Supp. at 538. See also Halper, 490 U.S. at 440, 109 S.Ct. at 1897; North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 2076, 23 L.Ed.2d 656 (1969). Because we agree with the district court that the administrative sanctions imposed upon Furlett--namely, the $75,000 fine and a prohibition on any trading--represent remedial, not punitive, measures we hold that the Double Jeopardy Clause does not require the dismissal of the pending indictment.

As he did in the district court, Furlett grounds his arguments upon the Supreme Court's recent decision in Halper. There the Supreme Court concluded that a sanction imposed in a civil proceeding may constitute the sort of multiple punishment prohibited by the Double Jeopardy Clause. As the district court related, the defendant in Halper was a medical laboratory manager who submitted sixty-five false Medicare claims for reimbursement, resulting in a total loss of $585 to the government. See Furlett, 781 F.Supp. at 539. When his fraud was discovered, Halper was indicted for violations of the...

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